Goods and Service Tax – What one must know !

VAT
Value Added Tax (VAT) was introduced at the Central level for a selected number of commodities in terms of MODVAT with effect from March 1, 1986, and in a step-by-step manner for all commodities in terms of CENVAT in 2002-03. Subsequently, after the Constitutional Amendment empowering the Centre to levy taxes on services, these service taxes were also added to CENVAT in 2004-05. The States started implementing VAT beginning April 1, 2005.

VAT may be considered to be a major improvement over the pre-existing Central excise duty at the national level and the sales tax system at the State level. Despite this success with VAT, there are still certain shortcomings in the structure of VAT both at the Central and at the State level. As per First Discussion Paper of Empowered Committee of State Finance Ministers, November 2009, these are some of the shortcomings-

  • Non-inclusion of several Central taxes in the overall framework of CENVAT, such as additional customs duty, surcharges,
    etc.
  • Keeping the benefits of comprehensive input tax and service tax set-off out of reach for manufacturers/ dealers.
  • Failure to capture the value-added chain in the distribution trade below the manufacturing level in the existing scheme of CENVAT.

Historical Background of GST

  • Empowered Committee of State Finance Ministers(EC) was asked to prepare a roadmap for introduction of GST in India in 2007-08. EC set up a Joint Working Group and the latter submitted its report to the Empowered Committee (November 19, 2007).
  • On the basis of the discussion and written observations of the States, certain modifications were made and a final version of the views of Empowered Committee at that stage was prepared and was sent to the Government of India (April 30, 2008).
  • The comments of the Government of India were received on December 12, 2008, and were duly considered by the Empowered Committee (December 16, 2008). It was decided that a Committee of Principal Secretaries/Secretaries of Finance/Taxation and Commissioners of Trade Taxes of the States would be set up to consider these comments, and submit their views. These views were submitted and were accepted in principle by the Empowered Committee (January 21, 2009).
  • Recommendations in detail on the structure of GST were given by a Working Group, consisting of the concerned officials of
    the State Governments.
  • The detailed view of the Empowered Committee on the structure of GST was presented November 2009 in the form of First Discussion Paper, along with an Annexure on Frequently Asked Questions and Answers on GST, for discussions with industry, trade, agriculture and people at large. It suggested that the GST at the Central and at the State level will give more relief to industry, trade, agriculture, and consumers through a more comprehensive and wider coverage of input tax set-off and service tax set-off, subsuming of several taxes in the GST and phasing out of CST.
  • The Constitution Amendment Bill was passed by the Lok Sabha in May 2015. The Bill with certain amendments was finally passed in the Rajya Sabha and thereafter by the Lok Sabha in August 2016. The Bill has been ratified by the required number of States. The Constitution (One Hundred and First Amendment) Act, 2016 received the assent of the President on 8th September 2016.
  • GST Council has been notified w.e.f. 12th September 2016
  • Four Laws namely CGST Act, UTGST Act, IGST Act and GST
    (Compensation to States) Act were passed by the Parliament and were notified on 12th April 2017. All the other States (except J&K) and Union territories with legislature have passed their respective SGST Acts.
  • The economic integration of India was completed on 8th July 2017 when the State of J&K also passed the SGST Act and the Central Government also subsequently extended the CGST Act to J&K.

Objectives of GST –

  • To amalgamate a large number of indirect Central and State taxes into a single tax,
  • To ensure a reduction in the overall tax burden on goods,
  • To make tax transparent to the consumer,
  • To make Indian products competitive in the domestic and international markets,
  • To ensure easy administration of indirect tax.

Definition

Article 366(12A), Constitution of India – “Goods and services tax” means any tax on supply of goods, or services or both except taxes on the supply of the alcoholic liquor for human consumption.

Goods and Services outside the ambit of GST –

  • Alcohol for human consumption-
    Power to tax it remains with the State.
  • Five petroleum products namely  crude oil, diesel, petrol,
    natural gas and ATF-
    GST Council to decide the date from which GST will be applicable.
  • Tobacco-
    Part of GST but power to levy additional excise duty with
    Central Government.
  • Entertainment tax – Power to tax remains with local bodies.

Taxes amalgamated under GST Model

  • Central Taxes subsumed under the Goods and Services Tax:
    (i) Central Excise Duty
    (ii) Additional Excise Duties
    (iii) The Excise Duty levied under the Medicinal and
    Toiletries Preparation Act
    (iv) Service Tax
    (v) Additional Customs Duty, commonly known as
    Countervailing Duty (CVD)
    (vi) Special Additional Duty of Customs – 4% (SAD)
    (vii) Surcharges, and
    (viii) Cesses.
  • State taxes and levies subsumed under GST:
    (i) VAT / Sales tax
    (ii) Entertainment tax (unless it is levied by the local
    bodies).
    (iii) Luxury tax
    (iv) Taxes on lottery, betting and gambling.
    (v) State Cesses and Surcharges in so far as they
    relate to supply of goods and services.
    (vi) Entry tax not in lieu of Octroi.

Constitution (One Hundred and First Amendment) Act, 2016

The Constitution (One Hundred and First Amendment)
Act, 2016

Relevant Legislations

  • Central Goods and Services Tax Act, 2017 and Rules under it;
  • Integrated Goods and Services Tax Act, 2017 and Rules under it;
  • Union Territory Goods and Services Tax Act, 2017 and Rules under it;
  • Goods and Services Tax (Compensation to States) Act, 2017 and Rules under it.

A number of authorities have been established to implement the provisions of the above legislations. Goods and Services Tax Council has been established under Article 279A, Constitution of India.

CGST Act,2017 and CGST Rules, 2017 provide for authorities namely-  Appellate Authority, Revisional Authority, Goods and Services Tax Appellate Tribunal, Anti-profiteering Authority,  Standing Committee, Screening Committees and Director General of Safeguards. Similarly, other authorities have been envisaged under the other relevant legislations and Allied Rules.

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Bhumika Sharma

She is currently a Research Scholar, (PhD) at Himachal Pradesh University, Shimla. She finds peace in research and writing on a variety of social issues. She believes in the power of education and awareness to deal with various problems.

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